Wanderlust Worker

How to Harness the Pareto Principle

“Success depends upon previous preparation, and without such preparation, there is sure to be failure.” — Confucius

Understanding the Pareto Principle

The Pareto Principle – also known as the 80/20 rule and the law of the vital few – states that 80% of the results come from 20% of the causes. The principle was named after Vilfredo Pareto, an Italian economist who observed in 1906 that 80% of the land was controlled by 20% of the people, and that 20% of the pea pods in his garden produced 80% of the peas.

Since its introduction by business-management consultant, Joseph M. Juran, the Pareto Principle has been applied and proven to exist in virtually all areas of life. Whether it’s mathematics, economics, business, software, health, or energy, the Pareto Principle finds itself statistically embedded into virtually everything.

So, why should you care?

Well, if you have a set of goals that you’re working towards, you can harness this single principle to literally explode your results by simply following a few steps that I’ve outlined below. This will aid you in getting closer to your goals much quicker.

Leveraging your Time with the Pareto Principle

Time is our most precious resource; it’s universally equating since we all have the same amount of time in our day. But most of us don’t use that time efficiently. We have productivity peaks when we’re most effective at whatever it is that we do. There are certain tasks, times of day, or even days of the week when we tend to produce the best results. So, by identifying these productivity peaks, and applying the 80/20 rule, we can optimally harness time and catapult our results.

Does this really work?

Yes. If you’re able to identify which 20% of your causes are producing 80% of the results, you could magnify your results exponentially by harnessing this principle. Once you’ve identified the 20% of the causes, you can devote more of your time to those causes, thus expanding your results. This applies to finances, time-managmenet, project management, and virtually every other area of life.

Real-World Applications of the 80/20 Rule

What’s even more interesting is that the 80/20 rule has been found to apply not only to the base-level of result, but it’s also further extensible as well. For example, if 80% of the sales comes from 20% of the customers, that 80% of sales from the top 20% of customers comes from 20% of that subset as well. Meaning that the top 4% of customers are producing 64% of sales. This was part of the argument presented by Perry Marshall in his book, 80/20 Sales & Marketing.

Now, imagine harnessing this principle to not only be able to effectively identify what specific inputs are producing the greatest outputs, but also be able to replicate and leverage this to exponentially grow any figure in any field. So, to extend the previous example, this would mean identifying that 20% of customers producing 80% of the sales, and going out there and finding more of those specific customers. Or, it could mean, identifying the 20% of daily tasks producing 80% of the results in whatever field you’re employed in, then focusing added time on those specific tasks to increase your output. Make sense?

So, how do we get started?

Step #1 – Identify Goals

The first step in harnessing the Pareto Principle is to identify your goals. When you know what your goals are, you have a target. Without a target in mind, the Pareto Principle is not very beneficial. If you’ve never done any goal setting, now is the time to get started. Goal setting is essential to progress and growth in any area of your life. It gives you a steady target for your mind’s eye.

Without goals, we feel a bit lost. We might think we know what we want in some obscure fashion, but we haven’t actually materialized those goals in front of our eyes. But, by writing out your goals, they become more real. Check out the recent post on S.M.A.R.T.E.R. Goal Setting and set some real and meaningful goals for your life today.

Step #2 – Track your Progress

The second step in leveraging the 80/20 rule for exponential growth in any area of your life, is to exhaustively track your progress. If you’re in sales, this means you should track the number of leads per day, how many phone calls or contact attempts you made (and the type of those attempts – i.e. email, phone, in-person, and so on), how many sales you closed, the dollar amount of those sales, your profit, etc.

Create a spreadsheet for yourself, whatever the goal may be. If you have a goal to lose weight, track it exhaustively. How much did you weigh this morning? What precisely did you eat (write it all down)? How many calories went into your body? How many calories left your body? What’s your BMR? How many steps did you walk? How much cardio did you do? Get the picture?

Step #3 – Identify the 80/20

Now that you’ve tracked everything exhaustively, you can identify your 80/20 subset. Which 20% is giving you 80% of the results? Once you’ve identified the 20%, you can work on scaling out your 20%. For example, if you’ve identified that 80% of your results in marketing are coming from a particular online campaign, scale out that campaign. Now, this is why tracking is so important. You have to be able to identify where your results are coming from.

Step #4 – Scale or Outsource

Depending on the type of goal you’re working towards, once you’ve identified your 20% subset, you can either scale out or outsource. For example, if you’re a graphic designer, and you find that 80% of your income comes from a specific 20% of your clients, your goal would be to scale or outsource that subset. How would you do that?

Well, if 80% of your income comes from 20% of your clients, but you spend 50% of your time on it, by reducing the time spent to 25% by outsourcing certain tasks related to that work, you can spend more time on scaling your business by locating more clients like your 20%. All you have to do is identify your 20% target demographics’ customer profile, and engage in marketing efforts to gain similar clients.

This applies to any measurable and trackable goal that you can have in life.

Step #5 – Identify the 20% of the 20%

To harness the true power of the Pareto Principle, if you want to exponentially explode your results, you have to identify the 20% of the 20%. The 20% of the 20% of your subset – or the 4% – is producing 64% of your results. So, if you can identify this elite subset, then you can truly develop explosive results by scaling out further.

The 4% of your subset are in a class of their own. The 20% of the 20% is your optimal peak performance segment. Identify this segment and replicate it in any way possible. This should be your utmost important task. Find this 4% and foster it, replicate it, and nurture it, and you’ll find yourself producing explosive results in the long term.